Barbados’ Virtual Family Office: A Lure for Latin America

Latin America is one of the world's fastest-growing wealth markets, as well as being home to an affluent class wealthier than other regions of the world.

On average high net worth individual in the United States is worth USD 3 million, whereas in Latin America the average is USD 15 million. Furthermore, Latin America represents only 4% of the world's high net worth individuals (those with over USD 1 million under management), while it represents 10% of the world's UHNWIs. As once middle-class families develop long- term wealth, and investor sophistication rises, wealth management clients are demanding expanded investment horizons, and greater returns opening the door for savvy advisors knowledgeable of this client base. (Latin America: Ultra-high Net Worth Report, Research and Markets, www.researchandmarkets.com accessed 13/02/2016).

What are Latin American investors looking for in an IFC?

The emergence of Latin American and Caribbean countries in the world market as a fast growing economy is gaining recognition and is steadily becoming a source of international business opportunities. The 2015 World Wealth Report shows that Latin American HNWIs invest mainly in cash and deposits, alternative investments, such as hedge funds, private equity and venture capital, as well as fixed income equities and real estate. Impact investing, either social through philanthropy, or environmental through innovation, has recently become a key determinant on the jurisdictions chosen by the Latin American Investor to place their assets.

Why Barbados?

To some, Barbados’ reputation as an international financial center is a well-kept secret, to many who have investigated and utilized Barbados as an international financial center; Barbados has proven positive returns on their investments.

Barbados is ranked 1 st in Latin America and the Caribbean for transparency and 15 th worldwide in the 2013 Transparency International’s Corruption Perceptions Index. In the Global Competitive Report 2014/2015, of 144 countries surveyed, Barbados ranked 4 th in Latin American and the Caribbean for soundness of Banks and 14 th worldwide; for global competiveness, Barbados ranked 4 th in Latin America and the Caribbean and 55 th worldwide; and in regulation of securities exchange, Barbados ranked 5 th in Latin America and the Caribbean and 33 rd worldwide. The 2015 Global Innovation Index ranks Barbados 1 st in Latin America and Caribbean nations for global innovation.

Barbados is primed to lure the Latin American HNWI and UHNWI. It is the home to the virtual family office, embracing highly skilled and experienced asset managers, trust service providers, corporate service providers, private banks, legal and tax advisors and risk managers, all who individually and collectively, together with sound global partners create an environment for the elite investor confidence.

Barbados offers a unique opportunity for Investment, rivalled by few; it possesses alternative tax solutions supported by its extensive treaty network and specially crafted investment vehicles. Currently standing at thirty-eight, Barbados has successfully negotiated Double Taxation Agreements (DTAs) with various countries including (regionally) Mexico, Panama, Venezuela and Cuba and extending further afield to Canada, USA, UK, China, Botswana and Singapore, to name a few. To ensure a secured investment climate, Barbados is currently party to eleven Bilateral Investment Treaties (BITs) otherwise known as foreign direct investment agreements, creating an environment of comfort for private investments by nationals and companies of one state into another. BITs exist between Barbados and Cuba, Venezuela, Germany, Canada, China and the UK, among others. In addition, Tax Information Exchange Agreements (TIEAs) currently exists between Barbados and five jurisdictions, among which is Columbia.

Various Foreign Direct Investment (FDI) incentives are available to the savvy Investor. Barbados’ legislation has kept abreast with the growing needs of today’s HNWI. Asset management and protection, wealth preservation and succession planning can be assured through the traditional Trust structure recognised in Barbados over thirty years. Apart from the traditional Trust structure having a component of a Trust and a Company, Barbados has recently enacted legislation, which allows for the use of the Private Trust Company (PTC) and the formation of a Foundation. A Foundation is a vehicle with which the Latin American investor is well acquainted and which due to its hybrid nature (Trust and Company) may afford flexibility to the investor and may prove to be more cost effective.

Captive Insurance is another very popular and unique vehicle for investment and wealth management in Barbados. It is defined as the business of insuring risks located outside Barbados in respect of which premiums originate outside Barbados and includes the business of the underwriter, broker, agent dealer or salesmen in respect of that business. Investors in this business enjoy low tax incentives and a strong and secured regulatory environment. Exempt Insurance companies are taxed on their profits at the rate of 0% for the first 15 years and thereafter, 2% on the first $250,000 of profits. These companies are also exempt from withholding tax and exchange control restrictions. According to the Barbados Financial Services Commission Report 2014/2015, “Barbados remains the leading jurisdiction for foreign entities seeking to set up captive insurance companies. The country is measures in the top ten (10) domiciles for captive insurance measured by the number of registered captive insurance companies.” It is reported that at the end of 2014 financial year, Barbados held 264 International Insurance Companies with the total assets as at 2013 of $126 Billion Barbados Dollars and a gross premium at $39 million.

A range of corporate vehicles such as the International Business Companies (IBC), the Societies with Restricted Liabilities (SRL) and the Regular Business Companies (RBC) each characteristically allows the investor versatility in doing business. On stream is an amendment to the Companies Act of Barbados permitting the use of incorporated cell companies (ICC), which will further boost the lure of Barbados’ international business sector, specifically in favour of its international insurance business.

Real Estate investment in Barbados should not be underscored. Prime real estate located in Barbados attracts the HNWI and UHNWI, from the luxury villas and plantation homes to the condominiums on the sea or private resorts and residences. Investors keen on Barbados’ real estate invest via corporate entities or individually, some primarily for adding to their investment portfolio, while others select Barbados’ real estate as their vacation homes. Foreign currency incentives apply to this type of investment and in cases where the investor qualifies, special entry and reside permits (SERP) are obtained permitting the investor and their dependants to reside and work in Barbados, in some cases, for an indefinite period. In part, qualification for an SERP extends to the HNWI with proof of a net worth of US$5 million at the least and having made an investment in Barbados valued at US$2 million or more. Such investment must be acquired or made with foreign sourced funds and should not be subject to any mortgage.

Avenues explored with modicum attention are registration of ships and private jets (which boasts of various incentives under the many Double Taxation Agreements of which Barbados is a part of), International Arbitration (of which Barbados is steadily on the path of becoming a Centre for International Arbitration and Mediation) and Philanthropy (currently on the rise through International Philanthropists, Domestic Individual Philanthropists and the increased desire for greater corporate responsibility).

The Barbados’ virtual family office can lure the Latin American Investor with diverse investment mechanisms, however, investment mechanisms without more, cannot attract the Latin American Investor of modern-day or for that matter any other investor. These mechanisms must be coupled with high standards of transparency and information exchange, a reputable Financial Centre, modern telecommunication and technology infrastructure, accessibility of air and sea ports, quality of life to work, live and raise a family, quality health care and education services, a stable economic and political environment and social responsibility. In addition, and not in the least, the UHNWI and the HNWI may take advantage of the luxury lifestyle offered through the luxury real estate high-end services available to visiting and private jet travellers, as well as, yachting and international motor sporting events, polo, golfing all additional features which Barbados possess.

About the Author:

Karen A. Perreira is a practising attorney at law of 22 years and the principal of InterCaribbean Legal a Barbados law firm. She is also an executive committee member of STEP (Barbados Branch), an Associate of ACIArb and member of the Barbados Chapter, Caribbean Branch, CIArb. Karen is a Certified Anti-Money Laundering Specialists and a member of the Barbados International Business Association (BIBA).

“Perhaps the simple definition of a family office is an organization that assumes the day to day administration and management of a family’s affairs.” Todd Ganos, Forbes Magazine, “What is a Family office”, 2013.

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